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Business Types and Ownership

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Questions and Answers

What type of business structure is characterized by unlimited liability?

Not-for-Profit Organization
Corporation
Partnership
Sole Proprietorship (correct)

What is a common source of equity finance for a business?

Bank Loan
Issue of Bonds
Venture Capital
Retained Earnings (correct)

What is a type of debt finance that involves borrowing from a bank or other financial institution?

Overdraft (correct)
Mortgage
Hire Purchase
Lease

What is a key consideration in financial decision making for a business?

Maximizing Profits (D) Signup and view all the answers

What is a common ratio used to evaluate a business's financial performance?

Current Ratio (C) Signup and view all the answers

What is a key benefit of a business having a diverse range of stakeholders?

Enhanced Corporate Social Responsibility (A) Signup and view all the answers

What is a characteristic of an unincorporated business?

Owner(s) and manager(s) are the same person(s) (C) Signup and view all the answers

What is an example of external equity finance?

Share capital (B) Signup and view all the answers

What is a consideration for a business when choosing a source of finance?

The intended use of the financial funds (A) Signup and view all the answers

What type of finance includes short-term credit and long-term credit?

Debt finance (C) Signup and view all the answers

What is a source of internal finance?

Retained earnings (B) Signup and view all the answers

What is included in the costs of a source of finance?

Both A and B (C) Signup and view all the answers

What is the primary method of financing for a sole proprietorship?

Personal financial capabilities of the proprietor (D) Signup and view all the answers

Who is responsible for making management decisions in a sole proprietorship?

The sole proprietor (A) Signup and view all the answers

What is a potential problem with a sole proprietorship?

Continuity problems in the event of retirement or illness (D) Signup and view all the answers

How are profits from a sole proprietorship reported for tax purposes?

On the proprietor's personal income tax return (A) Signup and view all the answers

What is a characteristic of a sole proprietorship that affects its management?

Concentration of management authority (A) Signup and view all the answers

Why are financial requirements minimal for starting a sole proprietorship?

Because it is easy to establish, with no specific financial requirements (B) Signup and view all the answers